Trade unions: government should spend more to boost economy

With the soaring deficit of the state budget and uncertain forecasts about the country’s economic output in 2010, the Czech government is working on a strategy to improve the state of public finances by severe cuts in spending. But the Czech Republic’s trade unions believe the government should do the exact opposite – stimulate the economy with more public spending. Radio Prague spoke to Vít Samek, the vice-chair of the country’s biggest labour union central, the ČMKOS, and asked him about the unions’ view of what should be done.

“In the concrete situation of the Czech Republic, it’s clear that the individual steps aimed at reducing public expenditures and increasing the revenues will go in many ways against the interests of employees in the country. The right-wing will oppose higher taxes, and the left, including the trade unions, will oppose reductions of expenditures in the social sphere. There is obviously not much room for budget restrictions here because our social spending is low, compared to some of the old EU member states.”

Temelín nuclear power plant

You have come up with several ideas of how to stimulate the economy in 2010, including the completion of the Temelín nuclear power plant. How do you see that happening without further burdening the already ailing public finances?

We feel it’s necessary to have an active state investment policy. We can’t just wait whether some private finances come to the Czech Republic. We had our experience with that in 2005 and 2006 when there was a right-wing government. The only voice was that we had to reduce state expenditures, to reduce the cost of labour, to lower taxes. And the result was supposed to be a better position of the Czech Republic, better competitiveness, higher wages, and so on. But nothing happened. So we have a problem with this kind policy. We need pro-active programmes, and those ideas you mentioned – those are clear. We have many of them, and we think we need to have both public and private investment in the economy. That’s the only way of increasing employment in the country.”

Vít Samek

Aren’t the trade unions concerned though that if all this is put into practice, it might lead to even higher deficit of the public finances and even greater problems later on?

“We don’t share this opinion. We are hoping for an active employment policy which will bring more tax revenues coming from the new economic activities. Perhaps we are Keynesians to a certain extent, but the only strategy, as we have seen in other parts of the world, consists in pro-active policies on the part of the state. Look at the United States and other countries – there are huge government investments with a temporary impact on the public finances but in the medium and long run, that’s the only way of getting out of the current fiscal problems.